Learn from China

Submitted by Hardnews on August 4, 2006 - 23:19

State commitment to health and education, decentralisation of governance, and attracting foreign investment have been key to China’s spectacular success Mohan Guruswamy DelhiAlmost inevitably the first question at you after a visit to China is, “Is it true?” It is indeed and the vast gap yawning between India and China spans most parameters. In the recent days there has been much euphoria about the rise of India as a world economic power and there has been some vocal speculation about India not only catching up with China, but also even overtaking it. Media hype and Davos hyperbole notwithstanding, India has a long way to go. The first impression while flying over China is how neat and geometrical the parcels of land are. In 1949, the state appropriated all land. Since then the land has been turned over to individual farmers to work, without giving them property rights, under a scheme of household responsibility. The size of each plot is viable unlike in India where it is a mere 1.4 ha, making it difficult to reach the target of four per cent. In the 1980s India’s agriculture grew at 3.1 per cent, as opposed to China’s at 5.9 per cent. In the 1990s this became 3.6 per cent and 2.7 per cent, respectively.The size and efficiency of the Pudong International Airport, the drive into Pudong, the brand new twin to Shanghai left one marvelling at the quality of infrastructure. India today claims more road length than China, but 46 per cent of it is unpaved. In China over 90 per cent is paved and all road links between the major cities and industrial areas are super highways. Streets are clean and garbage tucked away neatly. Good maintenance is possible because responsibilities are clearly assigned and failure to live up to them is swiftly punished. There are very few multiple authorities and so there is little scope for buck passing.But this does not explain why the Chinese are so far ahead of Indians. Very simply four things did it for them. The first and most important one is that by 1976 when Deng Xiaoping launched the reforms programme with the cryptic comment that “it’s glorious to be rich”, China had already accomplished very high indices in terms of health and education. Amartya Sen observed: “China’s relative advantage over India is a product of its pre-reform (pre-1979) groundwork rather than its post-reform redirection.” As President APJ Abdul Kalam put it in a somewhat different context, how can India go ahead leaving Bihar behind? The second big lesson from China is to decentralise government. These figures speak for themselves. In 1976 the central government accounted for 47 per cent of the entire state salary expenditure. By 2003 that became 28 per cent. By contrast in India that figure still hovers around 39 per cent. As a matter of fact public administration salaries are increasingly the burden of the local government in China. In India they account for only 12 per cent of all government salaries. The central and state governments manage to about equally share the rest. Today the wage burden of the state is an enormous Rs 189,000 crore amounting to almost 6.7 per cent of the GDP. What is as staggering is that such a small part of it is for the levels of government where the average citizen has the maximum interface. Local government has no say, let alone control, on essential everyday services such as education, healthcare, water supply, sewage and policing. If the teachers do not regularly show up in a primary school, the redress is in the district headquarters or even more far away state capital; ditto for the doctors and nurses who are supposed to man the public health centres.In China on the other hand local government is big. It is there at the centre of your village or town when you need. It is made answerable to the citizen consumer of its services every day. The plans and responsibilities of the local government are well spelled out and the work done is listed out for the citizen to inspect. I visited a few villages in Baishui County in Shaanxi province. Shaanxi, which has the historic and ancient city of Xian as its capital, is one of the poorer provinces in China. And Baishui County is regarded as among those closer to the bottom. Like being Dhule in Maharashtra or Anantapur in AP, Baishui is not without history. It was the home of Tsang Chieh, the Chinese patron of writing, who invented the written word. Baishui County is a hilly area with numerous coalmines dotting a harsh countryside and is a big apple growing area. More than half the population lives below the poverty line. In the small village of Bai Phu, I saw a scheme to relocate a cluster of homes, some of which were caves cut into the sides of cliffs. The new homes are really homes of three rooms each with all basic amenities and a private courtyard. These are a far cry from the mindless concrete rooms with zinc sheet roofs, which are the mainstay of our relocation schemes. The point here is that the common people are thought of as people who need some material comforts and a life with basic dignity. The local government official told me that the idea of giving them far superior homes than the ones they were required to leave was to compensate them for their losses, both physical and emotional: after all homes are full of memories too.In Yao Zhuo I saw village government in full flow. Here the village council ensures “community driven development” (CCD) to create a well-off and harmonious society (xiaokang shehui). Under CCD, local communities collectively decide what needs to be done to improve local village conditions. More importantly the local communities themselves manage programme development funds and manage the implementation of projects to ensure local needs are met. All this is under the full gaze of the entire community. All objectives are prominently displayed and progress charted out scrupulously. What I found totally fascinating was the map prominently displayed in the council’s office that indicated future land use. I was informed that the per capita income in the village was just 1,600 Yuan and that the target was to reach 4,000 Yuan by 2112. This meant that more land needed to be irrigated and developed as apple orchards. The village also planned a stone quarry, which would supply crushed rock to the big state highway projects running nearby. The important thing was that it was a plan made by the villagers and being implemented by them. Even without a Right to Information Act, government in China is relatively more open at the level that matters to people.Not that there is no dipping into the till going on. That evening I had dinner with Du Jian Zhun, Baishui County’s anti-corruption boss. Du is an intense man, who tells me not to get taken in by what I saw and think that everything is hunky-dory in Baishui. Corruption is a big problem, but he is there to fix it. And in China they fix things going wrong with singular dispatch. When I was in China the vice-mayor of Beijing was sentenced to be shot for embezzling the equivalent of $1.2 million, the kind of money almost every third Indian bureaucrat pockets these days. The difference is that in China you pay for it if caught. In India you rise to greater heights. Thus each of our states now has a half a dozen chief secretaries and directors general of police. Like molecules of fat bound together in cream they rise to the top together. As part of the decentralisation programme the control of most State Owned Enterprises (SOEs) has passed on to the provincial and local governments. As the central government realised that it was unable to either sustain these companies or make investments to make them grow and do better, they were handed over to the provincial and local governments. As the productive utilisation became central to their economic development plans, these SOEs were either turned around or shut down or just simply sold. This would be akin to handing over Scooters India Limited, the public sector in Lucknow that has not produced a scooter in decades, now to the UP government or to the Lucknow Municipality. But thanks to Atal Behari Vajpayee this company, the jewel of his constituency, continues to be afloat with huge annual giveaways from the central government. Why Vajpayee, even Mulayam Singh will not let it be sold. But if it was handed over to his government, he probably will know what needs to be done? Not only SOEs, but also even the historic sights have been handed over to the local governments to develop and exploit their tourist potential. The sight of the excavations of the world famous terracotta warriors is one such place. The local government has turned the findings into a memorable spectacle. Thousands of tourists pour in to visit and the local business thrives. Business now is the main business of China.The next big lesson to be learnt from China is not to be afraid of foreign investment. Deng Xiaoping dismissed all fears about foreign capital with a pithy remark that “it didn’t matter if the cat was black or white as long as it caught the mice!” Try telling that to the ever-scowling Comrade Gurudas Dasgupta or the pigtailed astrology believing nuclear physicist, Murli Manohar Joshi. Since 1980 China has received over $540 billion as Foreign Direct Investment (FDI) compared to India that got a mere $38 billion. The FDI companies in China now account for 52 per cent of its exports. They have realised that the dividend is the smallest outflow from a firm and it is value addition that matters. That is why China’s manufacturing value addition represents 51 per cent of its GDP or over $650 billion as opposed to India’s 26 per cent, making less than a fifth of China’s in value terms. The fourth big lesson to learn from China is to export, for that is what will industrialise us and also create the millions of jobs needed to get people off the land literally by turning farmers and farm workers into industrial workers. Last year China had a trade surplus of over $101 billion and a trade surplus of over $114.2 billion with just the US. The trade surplus itself accounts for 5.0 per cent of its GDP. By contrast, India has been having a string of trade deficit for almost half a century. We had current account surpluses for three years since 2002 due to the huge remittances from the US and the Middle East. Now we are back again saddled with a current account deficit. We don’t seem to realise that one sure way of getting wealthier sooner is to have a trade surplus. For this we need to think global and go global. The Chinese have showed the way. They welcome foreign investment from anywhere and anybody. Few countries are as reviled in China as Japan. But Japan accounts for 14.2 per cent of China’s FDI, 15.2 per cent of its exports and 16.8 per cent of its imports.There is much for us to learn from China. If we had someone like Deng at the helm now instead of a government of clerks, he would have given us the slogan of Xiang Zhung Guo or Learn from China.